Issue of 'Control' discussed by CCI in its
In its order dated 9th August, 2012, Competition Commission of
India ("Commission") approved the
proposed acquisition of equity shares of Multi Screen Media Private
Limited ("MSM India") by SPE Mauritius
Holdings Limited and SPE Mauritius Investments Limited (together
"Acquirers") from Grandway Global
Holdings Limited and Atlas Equifin Private Limited (together
Prior to the acquisition, while the Acquirers collectively held
62 percent of the equity share in MSM India, the Sellers held 32.39
percent and the remaining equity is held by FIIs. The Acquirers
have the right to nominate three directors on the Board, the
Sellers two directors and the FIIs have no such right.
Issue of Control
While discussing the issue of control and joint control the
Commission has observed that:
(a) Joint control over an enterprise implies control over the
strategic commercial operations of the enterprise by two or more
persons. In such a case, each of the persons in joint control would
have the right to veto/block the strategic commercial decision(s)
of the enterprise which could result in a dead lock situation.
(b) Joint control over an enterprise may arise as a result of
shareholding or through contractual arrangement between the
shareholders and the assessment of control over an enterprise would
depend on the facts and circumstances of each case with due
consideration of such relevant factors.
(c) Sellers' collective shareholding of 32.39 percent is
sufficient to block/veto any action that requires special
resolution under the provisions of the Companies Act, 1956.
(d) The following have been held to be strategic commercial
(i) MSM India engaging in any new business or opening locations
in new areas; and
(ii) The hiring or termination of CEO, CFO and other Senior
The assessment of control depends upon shareholding and rights
pursuant to such shareholding, rights pursuant to the Shareholders
Agreement and rights pursuant to any other agreement which can
influence strategic commercial decisions. The aforesaid analysis is
in sync with the European Commission's Consolidated
Jurisdictional Notice under Council Regulation (EC) No 139/2004 on
the control of concentrations between undertakings, issued in
In view of the above-mentioned facts –
1. some guidance on the parameters for minority
'negative' control has now been provided, and
2. an acquisition leading to a change from joint control to sole
control is not eligible for the exemption from filing available to
intra-group acquisitions. The Commission acknowledges that
assessment has to be done on a case-tocase basis.
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